Sweden’s push to cashless: too much, too soon?

Sweden is often touted as being at the forefront of the move toward ‘cashless society’, but the country’s central bank now warns the move is happening “too rapidly” and parts of society are at risk of getting left behind.

In a statement submitted to the Swedish ministry of finance last week, Sveriges Riksbank – the central bank of Sweden – calls on parliament to introduce a legal requirement that guarantees banks’ cash handling services are maintained. While it broadly welcomes the move toward digital, the central bank warns that remote parts of the country and certain demographics could get locked out of the financial system altogether at the current pace of change.

Cashless society

Home to high profile European fintech companies such as e-commerce checkout provider Klarna and mobile payments firm iZettle, Sweden’s capital of Stockholm is regularly held up as an example of what a cashless world could look like.

Meanwhile the circulation of cash continues to fall as Swedes’ reliance on coins and notes declines. Apart from having a tech-savvy population, the country’s banks have played a role in driving this shift. In 2012 a group of Sweden’s biggest banks – including Nordea, Handelsbanken and Danskebank – launched digital payments app Swish, helping galvanise the transition away from cash.

However, Sveriges Riksbank argues that while these are positive steps for the country, banks need to remember that there are still parts of Sweden and situations where cash is the only option.

“This development is positive in itself, but needs to take place at a rate that does not create problems for certain groups or exclude anyone from the payment market,” the central bank comments, warning that cash could disappear faster than the adoption of alternative payment options gains traction.

“If the banks continue to set the pace, there is a high risk that the possibility of using cash will disappear before alternative means of payment have become widespread and generally accepted,” states Sveriges Riksbank. “To restrain this development, the Riksdag (the Swedish parliament) should introduce a clear obligation for the banks to provide basic functions that meet customers’ needs.”

The bank also warns that eliminating the option to deposit cash would mean a greater likelihood of payments happening outside the banking system and increase the risk of money laundering.

Sveriges Riksbank’s position is, unsurprisingly, echoed by the ATM Industry Association (ATMIA). Its chief executive (CEO), Patrick Nordwall argues that the state has a responsibility to maintain the handling of cash in society, especially from the viewpoint of financial inclusion of the Swedish people.

Asset bubble

The dash to phase out cash comes as Sweden is warned of the possibility of an unsustainable asset bubble – an unintentional consequence of Sveriges Riksbank’s pushing policy rates into negative territory.

Credit ratings agency Moody’s warns that this could be a consequence of the bank’s failure to engineer higher inflation.


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